KEIN points to revitalization, MSMEs as keys to growth. An economic advisory committee has stated that the government needs to revitalize the manufacturing industry and provide incentives to micro, small and medium enterprises (MSMEs) in order to attain greater economic growth amid the current external challenges.
Economists have often said that the country’s industrial structure had a “hollow middle”, meaning that it lacked midstream industries to connect upstream and downstream businesses.
This disconnect between upstream and downstream businesses was indicated by the large volume of raw materials, capital goods and intermediary goods that were imported for use in manufacturing.
“KEIN urges higher growth through industrial revitalization,” the committee’s Hendri Saparini told reporters on Monday at a media gathering in Jakarta.
She added that the industry’s incomplete value chain would result in suboptimal production and value-added products, and suggested that the government develop comprehensive and integrated policies to address the issue.
A recently released report co-authored by the Asian Development Bank (ADB) and the National Development Planning Board (Bappenas) estimated 6.31 percent growth in potential Gross Domestic Product (GDP) between 2020 and 2024, as long as the country gradually increased manufacturing employment to 20 percent of the workforce by 2024.
KEIN had previously called on the government to focus on developing the agribusiness sector, the maritime industry, creative industries and the tourism industry to drive economic growth, saying that these sectors had a high employment rate and could therefore yield a higher multiplier effect on GDP.
In addition to revitalizing industry, KEIN deputy chairman Arief Budimanta said empowering tens of millions of MSMEs in the country was also vital to unlocking higher growth in potential GDP.
Data at the Cooperatives and Small and Medium Enterprises (SMEs) Ministry shows that MSMEs dominate Indonesian businesses at 99 percent, with 62.92 million businesses categorized as MSMEs in 2017.
The data also shows that MSMEs employed 116.67 million workers that year.
Arief said the government could do more to try and penetrate non-traditional export markets, particularly African countries on the basis of ties forged through the Asia-Africa Conference.
He mentioned Tanzania, Kenya, Egypt and South Africa as potential trade partners.
Indonesian imports to the four countries were dominated by crude palm oil and derivative products, which were primary export commodities. However, Indonesia’s market share in the four countries was less than 1 percent, according to data from the World Bank and United Nations Commodity Trade Statistics Database.
Arief said that the key was focusing the country’s trade mission in these countries, as Indonesia had “emotional ties” to many African countries.
Mohamad Fadhil Hasan, a KEIN member and corporate affairs director of palm oil producer Asian Agri, said the government should pursue serious and consistent structural reforms to boost GDP growth.
“For example, supply side reforms such as deregulation, [increased] investment,” he said.
He added that Indonesia should position itself at the forefront to take advantage of opportunities that emerged through industry relocations from China, amid the tensions in China-US trade. KEIN points to revitalization, MSMEs as keys to growth (Marchio Irfan Gorbiano, The Jakarta Post)
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